MCX Stock Exchange (MCX-SX) is considering bringing in foreign investors and a couple of international stock exchanges have shown interest in buying a stake.
The exchange has been struggling to raise funds with a rights issue, ending on Thursday. A spokesperson said, “The issue is not the only option available for capital infusion. Preferential placement, roping in strategic investors, M&A (merger and acquisition), etc, are under consideration, too.”
The rights issue offering was two shares for every one held, at Rs 5 a share. Each share is of a Rs 1 face value. The exchange plan was to mobilise Rs 200-250 crore (Rs 2-5 billion) after the issue.
It was getting a good response but faced some hurdles after the Central Bureau of Investigation began a preliminary inquiry into the circumstances in which a license was granted to it by the regulator, following which there was a slowing in the rights subscriptions.
However, a recent announcement by the Reserve Bank of India regarding withdrawing some of the restrictions in currency futures, such as reducing the margins and the possibility of extending the trading hours in the currency segment, has revised the interest in the rights issue, as both could add to the volumes and income of MCX-SX.
The exchange official said the present priority was the rights issue. “The response has been encouraging. We are in touch with all our shareholders, particularly, the banks. The funds have started coming in but banks have to seek approvals from their investment committee, board and RBI, which is a time-consuming.”
After the issue, more consolidation and growth steps are likely. “We have plans to rope in new foreign investors as strategic partners. A few international stock exchanges and large liquidity providers have evinced interest. However, in the current environment, the exchange will struggle to attract a good valuation. So, while there has been expression of interest by such entities, we would prefer to do these issuances after a couple of quarters,” he said.
The names of exchanges and liquidity providers could not be ascertained.
There is a proposal to merge another stock exchange with MCX-SX; it could be ailing United Stock Exchange, desperate to check its erasing net worth. One or two regional exchanges which have no volumes could also be a target.
An MCX-SX spokesperson declined to discuss details, saying, “a merger amongst exchanges brings in lot of synergy, consolidation of net worth, reduction in cost and increase in volumes. A merger with a national or regional stock exchange is also an option and we will evaluate it post our rights issue.”
The new management of MCX-SX has taken a number of steps to cut cost and these have reduced losses to Rs 8-10 crore a month. Some of these measures include negotiations with Financial Technologies (FTIL), the erstwhile promoter) on their software services and others. Temporary suspension of the liquidity enhancement scheme has been undertaken.
“Wherever possible, non-software related services taken from FTIL have been replaced and all such activities are now being done in-house or by other vendors. This, coupled with the improved realisations from the currency derivatives segment, post the relaxation in margins and extended trading hours, will enable us to break even by the third quarter of this financial year,” said the spokesperson.
